Recap – As per MOSPI survey, there are a total of 2.50 lakh factories in the country with Rs 55.4 lakh crore of capital invested at the end of FY22. While profits for these factories grew by sharp 42% CAGR during FY20-22, wages grew by only 5.4% CAGR.<\/p>\n
An important figure to look at, from India\u2019s perspective is employment intensity or number of persons engaged per unit of invested capital. Wearing apparel is the most important sector on this count, generating maximum employment of 16.3 workers per crore of investment. This contrasts with only 0.24 persons employed in the petroleum refining industry. The high employment intensity of apparel sector means a person can start an apparel factory employing ten persons with just Rs 62 lakh of investment, equivalent to cost of a flat even in a tier II city.<\/p>\n
For a country like India, other important criteria would be industries which add more value per unit of capital. Here also, apparel industry stands at 0.60 crore of GVA per crore of IC against average of 0.37 across all industries.\u00a0Other industries with high GVA\/IC are \u00a0transport equipment (selected segments) and Pharma with high productivity in the range of 0.58-0.67. Among the sectors with low GVA\/capital are Oil refining and Metals at 0.20 and 0.36. (Incidentally, these are also the sectors with highest amount of invested capital at Rs 6.6 lakh crore and Rs 9.4 lakh crore). Even food processing industry has a relatively low GVA\/IC of 0.28 which could be the key reason for inadequate investment in this industry. <\/em>However, the sector\u2019s growth is important because it employs largest number of people and is critical to improve the earnings of rural India. An interesting aspect of the discussion is that Tobacco products is the most productive sector on both count adding 1.4 crore of gross value per crore of investment and employing as many as 37 workers per crore of investment! Yet, as a result of its adverse impact, the sector has seen its share come down over the years.<\/p>\n In terms of\u00a0size or what is called economies of scale, petroleum refining and allied industry are biggest with average investment of Rs 400 crore per factory. In contrast, wood products, leather, apparel etc deploy less than Rs 6 crore per factory making them most suited for small entrepreneurs. However, these sectors also generate significant amount of effluent and factories may not be adequately equipped to control the ill-effects of these effluents. Government\u2019s subsidy towards providing centralized waste treatment facilities etc would help the growth of these industries in a more sustainable manner.<\/p>\n One interesting result that comes out from the analysis is that sectors with higher capital investment also pay higher wages to its employees. Average wages for employees (including all staff) in top three capital intensive sector is Rs 5.9 lakh, more than double the wages in lowest five sectors. A reason could be that capital intensive sectors would have greater degree of automation requiring more precision and higher level of skill and therefore, better paid jobs.<\/p>\n In terms of States, Gujarat and Maharashtra account for highest amount of fixed capital at Rs 6.8 and Rs 4.5 lakh crore. (State wise invested capital is not available but would largely be in line with fixed capital). However, Tamil Nadu accounts for highest number of persons engaged at over 26 lakhs with fixed capital of Rs 3 lakh crore only. This means Tamil Nadu is employing 30% more workers than Gujarat with less than half of fixed capital. For a country like India, probably Tamil Nadu would offer more clues to engage large skilled force more optimally.<\/p>\n While the survey provides extensive information for the entire set of industries within the country, the information being provided has been curtailed over the years. Below mentioned are two such figures – distribution of factories across rural and urban areas last provided in FY20 and contribution of factories with respect to their size (irrespective of the industry), last provided in FY16. While rural India accounted for 42% of the factories in FY20, the share in total invested capital was significantly higher at 59%. This implies bigger size of factories in rural India; with investment of Rs 28 crore per factory against Rs 14 crore in urban center. While the result may be contrary to perception, the reason is not hard to seek. A large number of factories come up away from urban centers, say at a distance of 50-60 km in areas classified as rural. Primary reason for the same is availability of cheap and large tracts of land in these areas and less stringent regulations as compared to urban areas. A number to corroborate this is rent paid – as a percent of total output, it was 0.04% in rural area against 0.07% in urban area. (The figure includes only rent paid for land or mines royalty and not real estate rent which is included elsewhere).<\/p>\n In terms of size, the data for FY16 shows that while factories employing up to 50 people accounted for just 8% of total invested capital, its share in number of persons employed was almost double at 14.5%. In contrast, mega factories employing more than 5,000 persons account for 22% of invested capital but engaged only 9% of people. Further, productivity (GVA\/Invested Capital) of smaller factories is 50% more than that of mega factories. While mega factories have an important role to play, it is equally essential to push MSME sector to find income generating employment opportunities for India\u2019s vast population.<\/p>\n","protected":false},"excerpt":{"rendered":" Recap – As per MOSPI survey, there are a total of 2.50 lakh factories in the country with Rs 55.4 lakh crore of capital invested at the end of FY22. While profits for these factories grew by sharp 42% CAGR during FY20-22, wages grew by only 5.4% CAGR.<\/p>\n","protected":false},"author":8,"featured_media":18623,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[857,858],"tags":[],"class_list":["post-18226","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-industry","membership-content","access-restricted"],"yoast_head":"\n